UniCredit lifts profit guidance, leaving Banco BPM bid behind

UniCredit on Wednesday posted a sharp second-quarter profit hike and lifted its full-year guidance, a day after withdrawing its takeover bid for Italian peer Banco BPM amid opposition from Rome.

Italy’s second-largest bank reported a 25% year-on-year hike in net profit to 3.3 billion euros ($3.87 billion) in the second quarter when including one-off items, and 2.9 billion euros without them. Net revenues dipped 4.7% year-on-year to 6 billion euros in the July quarters.

Other second-quarter highlights included:

• Return on tangible equity hit 24.1%, compared with 22% in the first quarter.
• CET 1 capital ratio, a measure of bank solvency, was 16.2%, versus 16.1% in the March quarter.
• Net interest income — the difference between revenues made on loans and interest paid on deposits — dipped to 3.5 billion euros, down just 0.3% from the January-March stretch.

UniCredit said it now expects full-year net profit to hit 10.5 billion euros, compared with previous guidance at 9.3 billion euros issued in the first quarter.

The bank’s results come a day after it announced it was withdrawing its bid to acquire Banco BPM, whose offer period was due to naturally expire on Wednesday. UniCredit said the takeover attempt was impacted by the Italian government’s exercise of its “golden power” rules, which enable Rome to intercede in transactions believed to impact national security — and which Giorgia Meloni’s government exercised to impose a spate of conditions to clear the transactions.

This “prevented UniCredit from engaging with BPM’s shareholders as a normal offer process would have allowed,” UniCredit said Tuesday.

Italian and European regulators have previously championed for UniCredit to withdraw from Russia, which remains under wide-spanning sanctions since its full-scale invasion of Ukraine. UniCredit CEO Andrea Orcel had signaled he could let the offer expire, noting the opacity of Rome’s requirements could both reduce the deal’s appeal and expose the Italian lender to penalties nearing 20 billion euros. 

The European Union has increasingly turned its eye to government obstruction of banking mergers under its umbrella, challenging the use of Rome’s “golden powers” for lender acquisitions and criticizing Spain over its intervention in Banco Bilbao Vizcaya Argentaria’s bid for Sabadell, according to media reports.

UniCredit stepped to the forefront of a M&A fever that has increasingly swept up the European banking sector, after making two separate overtures since the end of last year. While its Banco BPM bid has now been left behind, the lender still has access to roughly 28% of German lender Commerzbank’s shares through financial instruments – of which 20% have been converted to equity. The German government also opposes this takeover.

This breaking news story is being updated.